Given that it's tax season (don't forget, Tax Day is on 4/18 this year), you might be thinking about the bipartisan tax cut compromise from December 2010 and wondering how it affects your household's bottom line. That's why we've put together a Tax Cut Calculator and Tax Cut Checklist to help taxpayers better understand how you benefit from some of the more than 40 tax cuts signed into law by President Obama.
The brand new Tax Cut Calculator provides an easy to use tool that shows individuals and families how these tax cuts – some of which are hitting paychecks right now– will affect their taxes for 2011. The Calculator shows the benefits of the Payroll Tax Cut, which is putting more money in the pockets of millions of workers across the country already. It also illustrates how families can benefit from three Recovery Act tax cuts that the President fought to extend – the American Opportunity Tax Credit (AOTC) and the expanded Earned Income Tax Credit (EITC) and Child Tax Credit.
Enough explanation, though! Take a moment to try the tax cut calculator for yourself.
We've put together a more comprehensive memo that covers important provisions of the bipartisan tax cut compromise the President signed into law last December and includes a checklist of benefits to keep in mind for those who still have yet to file their taxes this year:
Last December, thanks to a historic bipartisan agreement signed into law by President Obama, 159 million Americans are receiving an extra benefit in their current paychecks through the Payroll Tax Cut. This translates toatax cutof $1,000 for a typical family earning $50,000 per year. Families will also continue to be eligible to claim key Recovery Act tax cuts in 2011 and 2012 that they are now claiming for 2010. These tax cuts include the American Opportunity Tax Credit, which will help over 9 million college students and their families afford college, as well as expansions of the Child Tax Credit and the Earned Income Tax Credit that will provide larger tax cuts to 15.7 million families with about 29.1 million children.
- The Payroll Tax Cut: The law signed by the President creates a new Payroll Tax Cut that is boosting paychecks for 159 million workers through 2011 by reducing the payroll taxes they pay on their wages from 6.2 percent to 4.2 percent.
- The American Opportunity Tax Credit (AOTC): 9.4 million families across the country will receive $18.2 billion from the AOTC – an average of $1,900 per family – to help pay for college. President Obama created the American Opportunity Tax Credit as part of the Recovery Act, and extended it through the end of 2012 as part of the bipartisan tax compromise. For more information on the AOTC, click here.
- Child Tax Credit: The bill that the President signed not only extended the $1,000 child tax credit, but it also continued Recovery Act provisions that made it available to more families. In total, extending the Recovery Act expansions of the Child Tax Credit that the President fought for will increase tax credits for 11.8 million families, with families with one child receiving up to $1,000 more and some families with two or more children receiving nearly $1,500 more.
- Earned Income Tax Credit: The bill extended expansions of the Earned Income Tax Credit for married couples and families with three or more children. In total, the Recovery Act provisions the President fought for in the bill he signed will benefit 5.8 million working families with 12.5 million children.
Don’t Forget: The new Tax Cut Calculator focuses on the tax compromise the President signed into law to provide tax cuts for workers and families in 2011. But when completing their tax returns for 2010 this April, taxpayers should not forget about the following Recovery Act tax cuts they may be able to claim:
- American Opportunity Tax Credit: The Recovery Act created a new college tax credit that provides up to $2,500 for each of four years of college to help cover the cost of tuition and other educational expenses. Learn more about the American Opportunity Tax Credit.
- Child Tax Credit: The Recovery Act made more families eligible for the Child Tax Credit, and increased the value of the credit for certain families. Learn more about the Child Tax Credit.
- Earned Income Tax Credit: The Recovery Act expanded the amount that filers with three or more children could receive as a result of the Earned Income Tax Credit and increased the level at which it begins to phase out for married couples. Learn more about the Earned Income Tax Credit.
- Residential Energy Credits: Under the Recovery Act, Americans who made some types of energy-efficient upgrades to their homes last year can get 30 percent of what was spent back - up to $1,500 - this tax season. Learn more about the Residential Energy Credits.
- First-Time Homebuyer’s Tax Credit: First-time homebuyers who purchased by April 30, 2010 and settled by September 30, 2010 may be eligible to collect a credit of up to $8,000 with no payback requirement. Learn more about the First-Time Homebuyer Credit.
- Making Work Pay Credit: Over 110 million working Americans qualified for the Recovery Act’s Making Work Pay Tax Credit, which saved individuals up to $400 per year and married couples up to $800 per year in 2009 and 2010. Even though you probably received the benefit of this credit in your paychecks from adjusted tax withholding by your employer, you must still claim the credit on your tax return. Learn more about the Making Work Pay credit.
For families across the country, these tax benefits mean more money in their pockets and give them incentives to make energy saving home improvements, purchase a new vehicle or buy a home. That isn’t just good for working families – it’s also good for the economy overall. Those purchases are helping drive economic growth and provide more clean energy, manufacturing and construction jobs for working families right here in the U.S.
Adam Abrams is a Regional Communications Director.